Home > Manage your borrowing > Article centre > Articles

Budgeting - why bother?

What’s the point of doing a budget? To some listing all your outgoings and comparing them against your income may seem tedious but it will help answer two important questions:

0. How much do I spend?
0. Do I spend more than I earn?

Continued overspending will lead to serious debt. However sometimes we don’t realise how much we are spending.

The average price of a coffee is £2.65. If you bought one coffee each morning on the way to work, you be spending a whopping £600 a year just on your coffee alone.

By listing all your regular weekly or monthly outgoings you can keep track of your outgoings and if need be reduce them or maybe even stop them.

Be honest!

There is no point hiding any outgoings because their effect on your finances will not remain hidden.

Start with the basic bills:

• Mortgage or rent
• Food shopping
• Credit/store card payments
• Loan repayments
• Gas and electricity bills
• Phone and internet bills
• Council tax
• Insurance premiums
• Travel expenses
• Petrol costs
• Savings

Then list the extras and luxuries, which can end up being a long, long list.....

• Lunches
• Gym membership
• Cigarettes
• Nights out/day trips
• Regular treatments (eg: nails, haircuts, sunbeds etc)
• School uniforms
• Presents for people

If all these added together exceed your income then it is time to change your spending habits.

Online help

There are numerous online budget planners and calculators that can help you. However, before starting it is worth taking the time to get together any paperwork you may need such as payslips, council tax bills, insurance premiums etc.

For the future

Once you have completed your budget planner keep a copy of it handy as it is likely to need regular updating as your circumstances change.

You could set up a simple spreadsheet listing all your income and outgoings. Every time you take money out of the bank, or buy a purchase on your card - note it down with a description of what you spent the money on. You'll soon see how much you're spending and what you're spending the money on so that you can start making cutbacks. You could always try paying yourself a "salary" each week and try to live off that. Take out some money every Monday and make sure you live off that for the rest of the week. It might feel strange at first, but you'll soon get used to it.

Spending some time each week or month keeping track of your outgoings can not only save you money but will give you peace of mind and the feeling that you are in control of your finances.

Source: Time For Money